IGNOU BRL 115 2026 - Explain the Bullwhip Effect in supply chains. How does infor

Question

Explain the Bullwhip Effect in supply chains. How does information sharing and demand forecasting help in minimizing its impact on a retail business?

06 Aug 2026

Answer :

Word Count : 543

The Bullwhip Effect is a phenomenon in supply chain management in which small changes in customer demand at the retail level create increasingly larger fluctuations in orders and inventory as we move upstream toward wholesalers, distributors, manufacturers, and suppliers. In retail business, customer demand may change only slightly, but retailers may increase or decrease their orders by a much greater amount because of uncertainty, forecasting errors, promotions, stock shortages, or expectations about future demand. These variations can disturb the entire supply chain. For example, suppose a retail shop normally sells 100 units of a product per week. If customer demand increases to 110 units, the retailer may order 120 units to maintain safety stock. The wholesaler may interpret this increased order as a sign of much higher market demand and order 140 units from the manufacturer. The manufacturer may then increase

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